TUC calls for £5 billion fund to invest in future of British industry

A new £5 billion strategic investment fund should be introduced by the Government as a long-term investor in UK companies, says a new report published today (Friday) by the TUC.

The report Developing UK Industrial Policy says that the Government's decades-long laissez-faire attitude towards industrial policy has left British manufacturing trailing behind other European countries, and the economy with too great a reliance on financial services as an generator of economic growth.

The report calls on the Government to build on its new active industrial strategy - championed last year by Lord Mandelson in the publication New Industry, New Jobs - by setting up a well-funded body as a strategic investor in companies looking for a long-term partner.

The TUC believes a strategic investment fund would provide the kind of long-term investment that many UK companies have struggled to attract, particularly since the financial crash.

The £5 billion budget would come either from direct state funding, private investment, grants from bodies such as the European Investment Bank, or a combination of the three, says the report.

The TUC proposal is modelled on the French Fonds Strategique D'Investissement (FSI), set up in January 2009 with a budget of 20 billion euros. The FSI has two shareholders - the Government and the Caisse des Depots, a long-term investment body. It invests in companies of all sizes for approximately 8-10 years.

FSI funds are managed through a board of seven people, four from Government and three from the private sector. A governance body, comprised of 20 people from unions, MPs and business associations, is asked to advice on investment strategies.

In its first year the FSI invested 800 million euros directly into 21 companies and a further 600 million euros were invested through funds. Crucially the FSI associates itself with entrepreneurial risk, rather than simply offering subsidies. All of the companies invested in are currently profitable.

While the UK already has a Strategic Investment Fund, announced in budget 2009, it is far smaller than the FSI (the current budget is £750 million), is directed by the Department for Business and offers one-off grants rather than long-term investment that carry some degree of risk. The TUC wants to see the fund radically expanded and reformed so that it can be as a genuine investor in UK companies.

- The report is based on several literature reviews and interviews including with Gilles Michel, Chief Executive of the Fonds Strategique D'Investissement, and Mathieu Louvot, Adviser to President Sarkozy on industrial policy.